Cheque Savings or Credit? But what’s the difference?

Cheque Savings or Credit is a question you’ll frequently be presented with when paying for goods or services in Australia, but what is the difference?

As a new arrival (or soon to be resident) in Australia, I thought it would be worthwhile providing an overview of the Cheque Savings and Credit options and the key differences between each. Personally speaking, it took me some time to get my head around the whole thing so I hope you find this overview useful.

Many Australian banks now offer debit cards that can be used for transactions through both the Scheme (MasterCard or Visa) and EFTPOS systems. Many also allow you access or ‘link’ more than one account (for example, your cheque and your savings account) both from the same card. 

If you have one of these cards but it’s not directly linked to another account then whether you press credit, savings or cheque it still comes out of your day to day transaction account. Your choice however will determine which system your transaction goes through and what costs are paid for the transaction behind the scenes.

Cheque or Savings?

If you press Cheque or Savings, your transaction will be processed through the EFTPOS system after you enter your PIN. This means your bank will pay a flat fee — for example 5 cents — to the retailer’s bank.  Hitting cheque or savings also means the shop gets their money immediately and your account balance is debited immediately, hence no difference between current and available balances.

If you wish to withdraw cash ( ‘cash back’) at a retailers store, you’ll find that you’ll only be able to do this when selecting the cheque or savings option. This ensures you have adequate funds in your account to cover the withdrawal and also means that the retailer isn’t left waiting to get their cash back. Credit cannot be used when requesting cash back.

Selecting Credit

If you press Credit, the transaction goes through the MasterCard or Visa scheme system. A MasterCard or Visa fee is paid by the retailer’s bank. “Chargeback” protection may also apply when you pay by credit which could be handy when a retailer or manufacturer goes out of business but still owes you a product or money. This protection may differ from bank to bank though so do your research first.

When you select credit, it usually takes longer for the shop to get their money and if you view your bank statement or balance you’ll notice a difference between your current and available balance. This is the main reason for this difference.

As a side note, according to the Australian Merchants Payments Forum (AMPF), retailers prefer customers to press cheque or savings, as the costs for the retailer are lower (two or three of the largest retailers even receive a fee for EFTPOS transactions).

Banks, on the other hand, make more money when the Credit button is pressed.  This will probably explain why the banks encourage their customers to just select credit for everything and retails sometimes charge customers for using credit to pay for goods.

So in a nut shell that’s it. I hope you found this overview of the cheque savings and credit options useful however please feel free to provide any feedback in the comments below.